Atttractions of playing angel

By ANAMIKA VASIL*

It can be a matter of sheer chemistry or a gut feeling that connects a business angel to an entrepreneur.

Auckland-based first-time angel investor Ron Goodfellow adopts a "three Ps" approach -people, product and process in that order - in appraising a business opportunity.

The former TelstraSaturn chief financial officer's formula comes from experiences working in corporate finance in London, where the "three Ms" (management, marketing and money) used to guide him.

"I've just changed the Ms to the Ps," he laughs.

Whether you are working in a big or small business, "I suppose it's all about seeing the big picture of what you are trying to achieve".

"If you don't get on with the people you don't go to step two, which is to find out more about the product or service offered," he says.

"And if you don't like that or you don't think it has got credibility in the market, then you don't go to the next step, the process - which involves due diligence."

In assessing the people or team, Goodfellow explores their personalities and skills.

"You've got to be able to work with these guys. It comes back to the old gut feeling".

With the product, he checks out the company's references and talks to it clients. The process comes naturally for this chartered accountant and involves dotting the 'i's and crossing the 't's.

Goodfellow began angel investing last year, when he took a 26 per cent stake in Rex Software.

Mine (Mentor Investor Network) for Business Angels introduced the parties.

He settled on Rex after about two months of discussions and negotiations.

Goodfellow says he chose the Rex team because there was a "lot of chemistry" and during the several presentations they made to him they "sold themselves exceptionally well".

The company's blue-chip client base and technical products were also reassuring - Rex's out-of-the-box intranet services for medium to large businesses stood out for him because they were simple to use.

"So the niche seemed right and they were looking to take the product globally," Goodfellow says.

"It wasn't a start-up; it was more a started-up and now looking for distribution."

Another attraction was that the Rex team were keen to tap into his financial skills and experience.

Just nine months after he came on board as an angel investor and Rex's chief financial officer, Goodfellow is feeling buoyant about the company's future.

He easily rattles off a long list of new clients Rex has signed this year. The company is enjoying "explosive growth" and is making inroads overseas.

Becoming an angel investor was a natural career progression because he had always wanted to have a share in a business.

"I was cognisant of the fact that my skills are financial or process-based so I needed to find the allied skills, I needed to find someone with the vision in the market."

He found all these in the Rex team and alongside his skills all the bits slotted in.

He views his 'angel' deal as a key part of his investment portfolio, which includes property - "a bit of risk capital" for hopefully a high return.

"Coming from the UK I've seen the stock market halve. So I'm backing myself with other things."

Mine for Business Angels manager Melissa Yiannoutsos says the programme assists angel investors by providing a time-saving filtering system for new business opportunities.

Mine has two basic types of angels:

* Entrepreneurs who have successfully grown their own business and have the resource and experience to invest in other businesses.

* Corporate executives who want to help small businesses.

To attract an angel investor an entrepreneur or small business should have:

* An idea of what they want from the investor, both in terms of money and expertise.

* A passion for the venture.

* A thorough understanding of their market and the competition.

"They've ideally got a sustainable competitive advantage and the people behind it have the key characteristics to make it happen," Yiannoutsos says.

* Anamika Vasil handles communications for Mentor Investor Network.